In 2012, SBRA client banks earned on average $481,850 in fee income from the sale of the guaranteed portion of 7(a) loans. Those same banks earned an additional $34,000 in fee income from servicing the sold portion. They also earned interest on the unsold portion. These banks closed an average of 5 loans each.
Its easy to see what making a few SBA 7(a) loans can do for your bottom line!
The head of the SBA, Karen Mills, was recently quoted as saying that the automatic federal budget cuts expected to take place on March 1, 2013 should have little to no impact on the agency’s operation. She further stated that they will not need to furlough employees since they are already down to the requisite number through early retirement. The White House recently announced that loan guarantees would be cut by $902 million out of a $30 billion budget. Mills stated that the demand for 504 loans is expected to fall this year, and that will likely mean the agency will be able to meet demand for its other loans programs.
This is certainly good news for all that utilize the SBA programs.
2012 was a good year for 7(a) lending and 2013 promises a repeat. Fiscal 2012 saw dollar volumes down from almost $20 billion in approved loans in 2011 to just over $15 billion in 2012. Numbers of applications approved was also down from 54 million in 2011 to just over 44 million in 2012. While the numbers were down year-to-year, the growth trend continues with 2012 coming in at 20% over fiscal 2010. For the first quarter of fiscal 2013 as of 12/31/2012, dollar volume was up 21% over the same time last year.
Investors continue to favor SBA loans as premiums in the secondary market for 7(a) sales steadily increased in 2012. In the past week we have seen premiums of 14.932% for a ten year loan and a record 18.955% for a twenty five year loan. Less than a year ago twenty five year loans were just getting in the 14′s.
We feel that SBA lending will continue to be the best place for community banks to invest their loan dollars. With uncertainty still in the economy, banks will want to continue to preserve capital and maintain liquidity while earning substantial fee income. The 7(a) program provides these objectives while serving the needs of the small business community.
Small Business Resource Associates recently facilitated the packaging, approval, closing and sale of an SBA 7(a) loan for a community bank resulting in a record premium of 18.955%. The loan amount was $418,600 and the proceeds were used to refinance debt and purchase real estate and equipment for an established commercial contractor. Terms were 25 years fully amortizing at Prime + 2.75% floating and the bank will earn immediate fee income of over $45,000 plus 1% annually for servicing and interest on the unsold portion.
For the past six months we have seen a steady increase in premiums for 7(a) loans sold in the secondary market and we believe that trend will continue well into 2013. We are ready to assist you in becoming a leading SBA lender in your market.
The secondary market for SBA 7(a) loan sales is pricing very aggressively right now, even on fixed rate loans. Small Business Resource Associates recently facilitated the following transaction:
$714,000 loan, 25 year term fully amortizing, 6.50% fixed rate for 25 years. The guaranteed portion of the loan was sold on the secondary market for a premium of 9.55%!
Don’t let those competitive deals get by you, premiums are great even if you have to offer a fixed rate.
Small Business Resource Associates recently facilitated the following SBA 7 (a) loan transactions resulting in record premiums in the Secondary Market.
Loan amount of $292,000 for 25 years priced at Prime plus 2.75% sold for a premium of 17.829% with fee income to the bank of $30,484
Loan amount of $2,200,000 for 25 years priced at Prime plus 2.75% sold for a premium of 17.83% with fee income to the bank of $229,680
SBRA just sold a loan for a record premium of 16.751%! The loan was for the refinance of a hotel, $1.4 million for 25 years priced at Prime + 2.75% floating.
This is the highest premium that we or our secondary market investors have seen for the sale of an SBA 7(a) loan. The bank that made this loan will realize immediate income of $187,257. Could your bank use that kind of fee income? Call us today and let’s get started.
The secondary market is looking more favorably on fixed rates and rate caps these days. Continue reading
As of the end of February, gross loan approvals for the SBA 7(a) program are down. Continue reading
We recently asked several top performing community banks their “secrets” to being high volume producers of SBA 7(a) loans. Here is what they told us: Continue reading